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Euro tumbles on Greek vote results, approaches 11-year low

Mon, Jan 26, 2015 - 7:01 AM

The euro weakened on Monday, approaching an 11-year low versus the US dollar after projections showed Greece's Syriza party had won a snap election, raising the risk that the country may demand a debt write-off and end austerity measures.

PHOTO: REUTERS

[WELLINGTON] The euro weakened on Monday, approaching an 11-year low versus the US dollar after projections showed Greece's Syriza party had won a snap election, raising the risk that the country may demand a debt write-off and end austerity measures.

The single currency fell more than half a cent to around US$1.1140 in early Australasian trade after official projections showed the leftist party poised to take 149-151 seats in the country's 300-seat parliament.

The euro slipped to around 130.97 yen, coming within a whisker of a 16-month low around 130.90 yen hit late last week.

By 2055 GMT, the euro traded around US$1.1160 after its sell-off fizzed out ahead of US$1.1115 plumbed on Friday, its weakest since September 2003. It was unclear whether Syriza had secured an outright majority, which would raise the risk of a standoff with Greece's European lenders over austerity measures. "The market was largely anticipating a victory," said Sebastien Galy, senior foreign exchange analyst at Societe Generale in New York, adding that the selling was driven by stop-loss orders triggered below US$1.12 in holiday-thinned trade in Australia and much of New Zealand. "At the moment, the market believes that if there is any (debt) restructuring it would only involve the official sector and for now, the possibility of Greece leaving the euro zone even with the incoming government is small," he added.

Such a scenario could trigger a test of US$1.10, where large options lay, according to several research notes.

The euro has sold off dramatically, dropping from US$1.21 at the start of the year and losing more then 3 per cent against the US dollar last week, in the wake of aggressive asset-buying measures announced by the European Central Bank to shore up the region's struggling economy.

Losses in the single currency provided a broad boost to the US dollar, which rose to 117.50 yen and knocked the Australian and New Zealand dollars to multi-year lows.

The Aussie sank as low as US$0.7850, its lowest since mid-2009, while the kiwi fell to three-year trough of US$0.7422.